Chinese Phone Brands Want To Invest in India Despite Xiaomi's US$725 Million Seizure

China doesn't quite have the best of diplomatic relations with India, with the two world powers engaged in a hostile border dispute for years now. This tension has seemingly led the Indian government to target and regulate Chinese companies operating in its soil.

Credit: Wix

While China-India relations have since slightly improved, a lot of Chinese companies remain cautious about expanding business in its Asian neighbour. And they now have a reason to be, with Xiaomi's local subsidiary recently being accused of illegal royalty payments to foreign entities – accusations which the tech giant denied. The popular gadget and appliance brand is now facing regulatory pressure and more probes from Indian authorities.

Despite this, a lot of players in China's mobile phone industry seem to remain optimistic about continuing to grow operations in Asia's third-largest economy. India, after all, is a very important market for these tech brands, as The Global Times reports According to the latest data from the India China Mobile Phone Enterprise Association (CMPEA), an industry group that represents the Chinese mobile brands in India, the local purchasing rate in the South Asian country is already at 20% and could double in 2024. Chinese brands likely won't pass on these favourable market opportunities.

"The reason that Chinese-funded mobile phone companies choose to settle and expand business in India is because they are looking for a wider market while embracing globalization, and they also value the low labor and production costs," Mr Yang Shucheng, Secretary-General of CMPEA told the Global Times.

Credit: Wix

The association notes that more Chinese phone brands are pushing their partners to set up factories in India and move some production operations there for components ranging from camera modules, chargers, batteries, data cables and shell materials, among others. Oppo and Vivo, for instance, each purchased a plot of land to build an industrial park. The former has already started operating, while the latter plans to enter production next year.

Mr Harris Liu from the Chinese Chamber of Commerce in India said that the Indian government encourages local production and procurement.

Though not all Chinese companies are enjoying smooth business operations in India, Mr Liu's claim is not misleading. The Global Times points out that several mobile-related suppliers and manufacturers have a positive view of the Indian market and continue to engage in business in the country. Shenzhen-based TXD Technology, for example, a producer of LCD and camera modules in India, said they haven't experienced any disruptions from the government yet.

"Chinese-funded mobile phone brands are doing well in India, occupying about two thirds of the market, and it is an inevitable trend for Chinese-funded enterprises to help India build a complete industrial chain," added Mr Yang.

And the business outlook for Chinese phone brands in India could further improve in the near future. Citing an anonymous source, The Global Times notes the review of some Chinese investments may be relaxed, reopening the door for Chinese companies to help in the production of domestic goods in India.

As such, the expectation is for Indian authorities to treat Chinese companies fairly and ease up on regulatory scrutiny. Xiaomi's current predicament, of course, sends a bad message for Chinese companies – and perhaps other foreign companies – looking to expand their investments in India. But the situation could still change if the two countries could manage to set their differences aside and prioritise their trade relationships. This is the best way forward, with experts noting how China and India share great potential for complementarities that benefit both parties, when it comes to trade and investment.

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• Some Chinese mobile phone brands have been cautious about expanding business in India, with Xiaomi's local subsidiary recently being accused of illegal royalty payments to foreign entities – accusations which the tech giant denied.

• Despite this, they seem to remain optimistic about continuing to grow operations in Asia's third-largest economy, given the market's growth and how low production and labour costs are there.

• As such, the expectation is for Indian authorities to treat Chinese companies fairly and ease up on regulatory scrutiny. Xiaomi's current predicament, of course, sends a bad message for Chinese companies – and perhaps other foreign companies – looking to expand their investments. But the situation could still change if the two countries put effort into prioritising their trade relationships.